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Autodesk (ADSK) Q2 2022 Earnings Call Transcript

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ADSK earnings call for the period ending June 30, 2021.

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Autodesk (ADSK -1.18%)
Q2 2022 Earnings Call
Aug 25, 2021, 5:00 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Thank you for standing by, and welcome to Autodesk Q2 fiscal year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today's conference is being recorded.

[Operator instructions] I would now like to hand the conference over to your host, VP of investor relations, Simon Mays-Smith.

Simon Mays-Smith -- Vice President, Investor Relations

Operator, and good afternoon. Thank you for joining our conference call to discuss the results of our second quarter of fiscal year 2022. On the line with me are Andrew Anagnost, our CEO; and Debbie Clifford, our chief financial officer. Today's conference call is being broadcast live via webcast.

In addition, a replay of the call will be available at You can find the earnings press release, slide presentation, and transcript of today's opening commentary on our Investor Relations website following this call. During the course of this call, we may make forward-looking statements about our outlook, future results, and related assumptions, acquisitions, products, and product capabilities and strategies. These statements reflect our best judgment based on our currently known factors.

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Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10-K, for important risk factors and other factors, including developments in the COVID-19 pandemic and the resulting impact on our business and operations that may cause our actual results to differ from those in our forward-looking statements. Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information.

Autodesk disclaims any obligation to update or revise any forward-looking statements. During the call, we will quote a number of numerical growth changes as we discuss our financial performance, and unless otherwise noted, each such reference represents a year-on-year comparison. All non-GAAP numbers referenced in today's call are reconciled in our press release or Excel financials and other supplemental materials available on our investor relations website. And now I will turn the call over to Andrew.

Andrew Anagnost -- Chief Executive Officer

Thank you, Simon, and welcome, everyone, to the call. I hope you and your families remain safe and healthy. As we anticipated when we set out our guidance at the beginning of the year, unwinding uncertainty resulted in increased business confidence, investment and economic growth during our second quarter. This is reflected in strong product usage, which returned to pre-COVID levels across the globe, increasing bid activity on BuildingConnected, which reached all-time highs, and greater channel partner confidence.

When combined with strong execution, a resilient subscription business model, and the continued secular shift to the cloud, our growth accelerated again in Q2 and generated further momentum. RPO and billings grew 24% and 29%, respectively, driven by strong new product subscription growth, renewal rates and revenue retention. I am proud of what the team has accomplished so far this year. And again, I thank all of our employees, their families, our partners and customers for their continued dedication, patience and commitment.

I will now turn the call over to Debbie to take you through the details of our quarterly financial performance and guidance for the year. I'll then come back to provide an update on our strategic growth initiatives.

Debbie Clifford -- Chief Financial Officer

Thanks, Andrew. As Andrew mentioned, second-quarter results were strong. Several factors contributed to that strength, including robust growth in new product subscriptions, accelerating digital sales and improving subscription renewal rates. In addition, Innovyze and foreign exchange rate provided a modest tailwind to the quarter.

Total revenue growth in the quarter accelerated to 16% and 14% in constant currency, with subscription revenue growing by 21%. Looking at revenue by product, AutoCAD and AutoCAD LT revenue grew 12%. AEC revenue grew 21%, and manufacturing revenue grew 12%. Excluding the impact of moving our bulk product to ratable revenue recognition, manufacturing revenue grew in the mid-teens percent.

M&E revenue grew 10%. Across the globe, revenue grew 14% in the Americas; 16% in EMEA; and 21% in APAC. Direct revenue increased 31% and represented 34% of our total revenue, up from 30% last year due to strength from both enterprise and e-commerce. As you'll hear more about at our Investor Day next week, about three quarters of new customers to Autodesk are now generated through our digital channels, reflecting our efforts to enable a simplified buying experience.

Our product subscription renewal rates remain strong, and our net revenue retention rate remains within the 100% to 110% range. Billings accelerated 29% to $1 billion, reflecting strong underlying demand and an easier comparison versus last year. Total deferred revenue grew 15% to $3.3 billion. Total RPO of $4.14 billion and current RPO of $2.85 billion both grew 24%.

current RPO growth was driven by strong new product sales during the quarter and the ongoing benefit from the record number of EBAs signed in the second half of last year. Excluding the contribution from Innovyze, current RPO grew approximately 23%. Non-GAAP gross margin remained broadly level at 92%, while operating margin increased more than 2 percentage points to 31%, reflecting strong revenue growth and ongoing cost discipline. We delivered healthy free cash flow of $186 million during the quarter, primarily driven by strong billings growth.

Consistent with our capital allocation strategy, we continued to repurchase shares with excess cash to offset dilution from our equity plans. During the second quarter, we purchased 164,000 shares for $46 million at an average price of approximately $283 per share. Year to date, we have repurchased 679,000 shares at an average price of approximately $278 per share for a total spend of $189 million. Now, I'll turn to guidance.

Consistent with previous quarters, we expect that an improving economic environment during the year will result in strong growth in new business over the course of fiscal '22. We expect product subscription, volume, and renewal rates to continue to be healthy, and our net revenue retention rate to remain between 100% and 110%. With our strong start to the year, we are raising the low end of our full-year revenue guidance to a range of $4.345 billion to $4.385 billion, with a midpoint growth rate of 15% year over year. We are also raising our non-GAAP operating margin outlook to approximately 31%, an almost 2-point improvement from last year.

Our strong start to the year means we're also shifting more of our EBA customers from multiyear paid upfront to annual billings, which is good for them and good for Autodesk. Our EBA customers retain price certainty with a multiyear contract term, but annual billings give them a more predictable annual cash outlay. For Autodesk, we generate more predictable cash flow and remove the discounts to generate upfront cash collections. While we had already assumed this change in fiscal '23, it has a modest impact on fiscal '22 billings and free cash flow.

However, we expect it to drive more predictable free cash flow growth and better price realization over time, which will make Autodesk a more valuable company. The shift of more of our EBA customers from multiyear paid upfront to annual billings and FX account for the change in our fiscal '22 billings guidance and with a one-time M&A-related tax charge, our free cash flow guidance. As we look ahead, we're anticipating revenue growth to accelerate in Q3. Strong upfront revenues in Q4 last year, and with Vault now ratable, a smaller pool of nonratable products, create a tougher comparison in Q4 this year, which will reduce revenue growth a bit when compared to the third quarter.

Also, our EBA strength in the second half of last year, including two of our largest-ever deals in Q3, will impact RPO growth comparisons in the second half of our fiscal '22. The slide deck on our website has more details on modeling assumptions for the third fiscal quarter and full-year fiscal '22. As I shared last quarter, my initial focus after rejoining Autodesk was digging into our fiscal '22 budget and fiscal '23 financial goals. The strength we've seen in fiscal '22, combined with a significant cohort of multiyear product subscription contracts that we expect will renew in fiscal '23, set us up nicely to achieve our fiscal '23 revenue growth potential and free cash flow goal.

This past quarter, I turned my attention to our long-range financial plan, with a particular focus on fiscal '24 and beyond. You'll hear more at our investor day next week. But to set the stage today, our long-term strategic growth drivers and our flexible subscription business model give us confidence we can achieve our goal of sustainable double-digit revenue and free cash flow growth beyond fiscal '24. Now once we've achieved our fiscal '23 goals, we'll give you more details on our financial ambitions for fiscal '24 and beyond.

But on the whole, we believe we have many exciting opportunities to drive growth by further expanding our addressable market into areas like construction and infrastructure, as well as by deepening monetization of our user base. And we look forward to sharing more specifics with you at our investor day next week. Andrew, back to you.

Andrew Anagnost -- Chief Executive Officer

Thank you, Debbie. Now let me turn to our strategic growth initiatives. Sustained and purposeful innovation to enable digital transformation in the industries we serve is changing our relationships with our customers from software vendor to strategic partner. And that is enabling us to create more value through end-to-end cloud-based solutions that connect data and workflows and business model evolution.

By helping our customers grow, we will grow too. In AEC, digitization trends are accelerating the need to connect all phases of design and construction with end-to-end cloud-based solutions. A great example this quarter was with an Asia Pacific semiconductor manufacturer, which is rapidly expanding its manufacturing capacity around the world and looking for help to drive more efficient collaboration across project stakeholders, as well as shorter design and delivery cycles. It invested in AEC collections to accomplish this goal and is now leveraging the power of BIM and our digital AEC workflows to achieve its expansion plan.

This is a prime example of how Autodesk is positioned to help our customers as industries converge, with this customer being a longtime user of our manufacturing products and now expanding its footprint with us in AEC. In construction, we believe the Autodesk Construction Cloud is the best end-to-end offering across all phases of the construction life cycle. Starting with our industry-leading preconstruction offerings, we help our customers seamlessly convert data into a construction plan, allowing our customers to condition and coordinate models early to aiding clash detection, easily quantify the materials required for future construction, and leverage our BuildingConnected community to power the bidding process. As we turn to the field, Autodesk Build provides a single integrated solution for project management, field collaboration, quality, safety, and cost control, which is easy to deploy, adopt and use.

We just launched it in February, but we're already -- we've already seen Autodesk Build in use on more than 11,000 customer projects around the world. By connecting project information and teams in one common data environment, it enables efficient collaboration while providing predictive analytics and insights that increase quality and safety while decreasing risk. As I mentioned earlier, we've transitioned to being a strategic partner to our customers. And in construction, that means evolving our business model.

We provide customers more choice in how they buy. We offer both user and account-based pricing, which gives our customers the flexibility to decide how they want to engage with us on their digital journey. With our account-based pricing model, we're seeing significant benefits from driving as many users as possible to our construction platform. Once Autodesk Build has been deployed in a project, we've made it frictionless for anyone involved on the project to get access to our platform within minutes.

This pattern is not unlike the evolution of Fusion 360 over the last few years. The more users we see on our platform, the more we learn, the better we make our products and the more value we add to our customers. This quarter, Messer Construction, a top ENR 400 general contractor in the United States, selected Autodesk Build for project management over competitive offerings, Pype for submittal management, and BIM Collaborate for native class detection. As Andy Burg from Messer Construction said, "Autodesk Build's comprehensive unified platform is industry-leading and, by seamlessly connecting design with construction to increase our efficiency, establishes a strong partnership foundation and further enables us to build better lives for our customers, communities and each other." Autodesk Build's momentum is growing internationally, too.

Stamhuis is a leading retail shop construction and renovation company in the Netherlands, which had already used AEC collections in generative design to optimize client retail space, reduced design and construction errors by 15%, and improved its ROI by 10%. This quarter, it invested in Autodesk Build to further increase efficiency, reduce waste and add value for its clients by converging workflows from conceptual design to engineering and fabrication while seamlessly collaborating with its clients. Our relationship with Stamhuis demonstrates the value that digital construction processes can bring to customers around the world. With our significant international experience and resources, we're well-positioned to capitalize on this large growth opportunity.

And we continue to invest to connect and converge adjacent industries to create value and help our customers achieve greater efficiency. During the quarter, Innovyze's Info360 cloud platform launched a beta version of Info360 Asset, a cloud-based tool for the water industry's condition and performance monitoring and risk management processes. We also launched Autodesk Tandem, our digital twin offering focused on harnessing the data from the design and construction process to create a repeatable and dynamic process, with digital handover being the natural output of the project life cycle. Turning to manufacturing.

We continue to see strong momentum with our manufacturing portfolio this quarter, and we also saw the inclusion of Upchain in its first enterprise business agreement, or EBA, with one of our larger enterprise accounts. The convergence of design and make is accelerating, and we are seeing larger companies expand on our platform. For example, after using Fusion 360 and Moldflow to develop accurate digital manufacturing trends for injection-molded parts, which is typically a very iterative, time-consuming and expensive process, one of the largest American multinational medical device and pharmaceutical companies renewed and expanded its EBA with us this quarter. They were able to significantly reduce the time and rework costs because they could anticipate, predict and correct manufacturing issues before moving in production.

We continue to see subscription growth for Fusion 360 with paying subscriptions now at 165,000, and the Fusion 360 extensions are helping to increase our average revenue per subscriber and capture more potential opportunity. During the quarter, a U.S.-based global leader in design, engineering and manufacturing of woven wire mesh products transitioned to Fusion 360 as their main design tool and invested in our managed extension. The combination of Fusion 360 and managed extensions has largely automated their design and change workflows and has brought a new level of organization and efficiency on product design all the way through delivery. Our presence in education continues to expand to address the critical shortage in skilled labor.

For example, a growing number of large German companies are replacing competitive solutions and are training their apprentices on Fusion 360 to prepare them for the future of work. In the second quarter, Energie Baden-Wuerttemberg AG, EnBW, one of the biggest utility companies in Germany with 25,000 employees, adopted Fusion 360 to train its 600 apprentices. EnBW and its apprentices will benefit from the Fusion 360 cloud collaboration platform serving all their CAD, CAM and CAE needs while they are either on-site or remote. Education remains an important market for us, and we continue to broaden our reach with more than 43 million Tinkercad and Fusion 360 education users.

We continue to make progress transitioning all of our users to named users, giving customers more visibility into their usage data and allowing us to better serve our paying customers while also making it harder for non-compliant users to access our software. The Level group is a full-cycle developer, which specializes in business class complexes. During the quarter, it increased its investment with Autodesk by consolidating all of its single and multiuser subscriptions and permanent licenses to AEC Collections with our premium plan and Autodesk Docs to enable more efficient collaboration and license management. And with the help of 24/7 technical support and single sign-on capability, Level group expects reduced design costs in the future.

As our existing paying customers navigate the complexity of digital transition, we can help them manage that complexity, improve efficiency and sustainability and remain license-compliant. For example, one of the leading construction, civil, industrial, and infrastructure service contractors in Vietnam invested in AEC collections and Autodesk Build to balance project safety, efficiency, and quality while also reducing environmental impact and waste. Our license compliance team helped them identify licensing gaps and ensure installation of compliance software. We estimate that there are about 2 million non-compliant users within our paying customer base.

During the quarter, we closed 11 deals over $500,000 with our license compliance initiatives, six of which were over $1 million. At the end of September, we will launch a new pay-as-you-go consumption model called Flex. It matches the customer's cost with their usage. Flex is an important new way to purchase from us as we evolve our business models to offer more choice and flexibility.

It serves the long tail of customers who want an option for occasional users that do not use subscriptions every day. It also lowers the barrier to entry for existing and new users to explore new products with minimal risk and upfront costs. Now back to where I started. Sustained and purposeful innovation to digitally transform the industries we serve is also transforming our relationship with our customers from software vendor to strategic partner and enabling us to create more value for them through end-to-end cloud-based solutions, business model evolution and connected data and workflows.

By helping our customers grow, we will grow, too. The pandemic has accelerated these trends, and climate change is increasing the urgency. We will continue to invest to rise to the challenges ahead and seize the opportunities they present. In the meantime, we remain on track to achieve our fiscal '23 goals.

Please join us at our virtual investor day next week where we will have more time to share our strategic initiatives with you. Operator, we would now like to open the call up for questions.

Questions & Answers:


[Operator instructions] Our first question comes from the line of Saket Kalia of Barclays. Your line is open.

Saket Kalia -- Barclays -- Analyst

OK. Great. Hey, guys, thanks for taking my questions here. Maybe just to start with you, Debbie.

I'd love to dig a little deeper into the changes to billings and free cash flow this year. And maybe specifically, I was wondering if you could just help frame the size and impact of that change to EBA billings. And maybe as part of that, just talk about what sort of gives you the confidence in what's maybe just a little bit of a steeper ramp in cash flow growth now implied for next year. Does that make sense?

Debbie Clifford -- Chief Financial Officer

It does. Thanks, Saket. Thanks for the question. So we're seeing overall strength in the business, and we continue to demonstrate discipline with our spend.

So that's what's driving us to raise our guidance for revenue and margin for the year. For billings and free cash flow, I covered the specifics in the opening commentary. The key point to take away is this, we're focused on making changes that are good for our customers and good for us. And shifting more EBAs to annual billings helps us achieve that goal.

Now it makes sense for customers because they retain price certainty by signing a multiyear contract. But by moving to annual billings, they get a more predictable annual cash outlay. Of course, the change is good for us, too. We generate more predictable annual cash flows, and we remove the discounts we see today to generate cash collections upfront.

Most EBAs are already on annual billing terms. And also, we had already assumed that EBAs would all be on annual billing terms starting next year in our fiscal '23. We're making the change now because with the strong start to fiscal '22, we decided to get moving earlier to execute on the shift. But the overarching driver is that we're focused on optimizing our business, and the change, as we said, is good for both our customers and for us.

As a side note, the impact to our billings guidance is also pretty small. It's around 1 percentage point of impact to the total billings outlook. Now, if I shift attention to the ramp to fiscal '24, we do see accelerating momentum and multiple drivers of growth. Regarding multiyears, I want to break it down a bit.

We have two main pools of multiyears, one for our EBAs and one for our base product subscription business. What I've talked about today so far is EBAs and the ongoing shift to annual billings for that cohort. As we look ahead to next year, as I mentioned in the opening commentary, we have a material cohort of multiyear contracts that are coming up for renewal in our base product subscription business. Renewing those contracts is one factor that drives us to $2.4 billion in cash flow next year.

And year to date this year, the proportion of multiyear renewals that we're seeing in that cohort is in line with our expectations. So that, plus the strength in our top line year to date, gives us confidence in the path to the $2.4 billion free cash flow target next year.

Saket Kalia -- Barclays -- Analyst

OK. Got it. That's very helpful. Andrew, maybe for you, just zooming out a little bit more broadly.

You know, you talked a little bit about -- in your prepared remarks and the press release, I think you talked about sort of growing as your customers grow as well. And I think you touched on some examples in your prepared remarks also, but I was just wondering if you can expand on that a little bit and maybe just connect it back to the flexibility of the business model, if you will.

Andrew Anagnost -- Chief Executive Officer

Yeah. Saket, specifically, what I did say was I said as we help our customers grow, we will grow. And the reason I want to highlight that particular point here is a lot of the things that are going on with regards to us growing with our customers is they're increasing investment in digitization. This is here to stay.

It's continuing to accelerate. It's going to move forward next year and continue to accelerate. So the digitization engagement with our customers is why we grow as we help them grow because digitization is going to help them grow. It's going to help them be more responsive.

It's going to help them win more business. It's going to help them do a whole bunch of things that they were struggling to do previously, which is great for them and great for us. Now the other thing I'd add there is we're also responding to the way they want to buy. I mean I think you've noticed that we introduced Flex.

We haven't rolled it out yet. The customers can't yet buy it, but we introduced the concept of Flex. And Flex is something that a lot of our customers have been waiting for as we've been moving away from our old multiuser paradigm to single user. They've been waiting to see something that allows them to manage occasional use and maybe dive deeper into some of our more advanced digital technologies and integrate some of those things in the workflow.

So we're going to offer them the flexibility they've been looking for, and we're going to mainstream it across a lot of our customer base in the mid-market. But the other piece I want to highlight about Flex, in particular, is that it's also a tool for reaching the long tail of our customers. Flex is going to allow us to not only help with smaller businesses that use some of our tools only a couple of times a month, but it's also going to help us with smaller customers or departments within larger customers that want to use a particular advanced tool on an occasional basis. It used to be back in the '90s when it looks like the long tail first came out that you'd attack the long tail with a set of discrete products.

Tons -- you have tons of little products. The 2020 ways of approaching that is having a business model that allows people to get access to a set of capabilities in an ever-growing platform of products like what we're doing with Fusion. So look for those things, long term, can be important tools that we see forward. Things like Flex are not going to be short-term revenue drivers, but there'll be long-term ones there.

Digitization is the key underlying thing here. Our business models and the way we're approaching some of our advanced platforms are the enablers that allow our customers to digitize faster.

Saket Kalia -- Barclays -- Analyst

Got it, makes sense. Thanks, guys.


Thank you. Our next question comes from Adam Borg of Stifel. Your line is open.

Adam Borg -- Stifel Financial Corp. -- Analyst

Maybe for you, Andrew. So I'm sure we'll talk more on the broader strategy next week, but you've been very clear around this idea of convergence for some time. And, you know, earlier in the quarter, there was the idea of converging mechanical pad and electrical pad. And how should we think about that going forward? And are we looking to do that more on the organic front with EAGLE or, you know, potentially strategic partnerships or acquisitions? How should we think about that?

Andrew Anagnost -- Chief Executive Officer

Yes. So excellent question. You know, this convergence piece between mechanical design and electrical design is something we've absolutely had our eye on for quite some time. As, you know, we bought EAGLE several years back, and we have now tightly integrated it into the Fusion platform.

And we're doing some very, very interesting things around automation and integration between electronic PCB design and the associated mechanical designs that either contain it or actually interact with it in a smart product. So we're already attacking that convergence organically with our products. You saw us look externally as well because we saw an opportunity to accelerate the industry change. We believe these processes are going to converge.

We believe the leading-edge customers are going to be driving and using converged processes. And we saw a vision match out there, and we engaged in the discussion around accelerating this change in the market. We're still going after that market with Fusion, with EAGLE and the integration we have, and we're already moving up into the mid-market with some of these tools. So this is not going away.

This is a continuing and ongoing place for us to focus and look for us to continually increase what we're doing with EAGLE to make those convergences between mechanical and electrical design more fluid, more integrated and, frankly, more automated.

Adam Borg -- Stifel Financial Corp. -- Analyst

That's really helpful. And maybe just a quick follow-up. So, you know, just staying on the Fusion 360 and the manufacturing front. You've talked about in the past a lot of success with Fusion 360, even in the CAM space replacing vendors like Mastercam.

And just curious if today's announcements of that getting acquired can help accelerate the opportunity or change the dynamics competitively in some way. Thanks, again.

Andrew Anagnost -- Chief Executive Officer

Yeah. I think one of the things you also saw is that got acquired. There was a lot of visibility into the Mastercam business. And I think you can kind of see that the business was not growing as, say, robustly as, say, Fusion is growing, both from a user and billing standpoint.

So we're pretty confident that in the manufacturing side and the CAM side, we're doing a great job with Fusion, but we're also reaching deeper and deeper into people's entire process. A lot of the customers we're talking about publicly now are people that have rolled out Fusion across the entire process. And one of the things that's also exciting, you're seeing these large subscription counts, 11,000 again -- breaking 11,000 again this quarter. But one of the other exciting aspects here is that our billings growth is actually growing faster than our subs growth, which is a result of the new extension strategy, which is continually adding more and more advanced capability that people can buy on a pay-per-use basis or on a subscription basis to one of these extensions.

So we're continuing to see really good traction with Fusion. We're continuing to roll out new extensions. You'll see more extensions coming out this year into next year. And you'll also see us start to do some interesting new things from a platform perspective with Fusion as well.

So we're pretty bullish on Fusion. We feel pretty good about our position right here, and we're continuing to see growth. And you're right, I think the acquisition of Mastercam just shine the light on where the action is right now in the space.

Adam Borg -- Stifel Financial Corp. -- Analyst

Excellent. Thanks a lot for the color.


Thank you. Our next question comes from Jay Vleeschhouwer of Griffin Securities. Your line is open.

Jay Vleeschhouwer -- Griffin Securities -- Analyst

Thank you. Good evening. Andrew, you mentioned --

Andrew Anagnost -- Chief Executive Officer

I got to get my pen ready for the three-part question. OK. Pen's ready.Jay VleeschhouwerOK. So, you mentioned that usage is now at prepandemic levels, and the question has to do with new products of volume.

It's an easy compare year over year versus last year, but would it be reasonable to say that new product subs volume, the core of the business, ex EBA, ex cloudy products, ex M2S is above levels of two years ago and that your expectations for the remainder of this year as soon as the next year is that, that will remain the case that you're now well above where you were two years ago in terms of that core product volume? And then similarly, for many years, LT was considered to be a good leading indicator or a barometer of the business. Given the change in the profile of your product mix, your portfolio, plus the fact that Autodesk seems to be encouraging full AutoCAD adoption in lieu of LT, you're clearly not encouraging LT, is there some change in the barometers or indicators that you look to for the business?

Yeah. OK. Great questions. So let me address the first part.

There's only two-part questions, Jay. You disappointed us.

Jay Vleeschhouwer -- Griffin Securities -- Analyst

I can give you a third.

Andrew Anagnost -- Chief Executive Officer

So, new product subs is up significantly, OK? You know, I'm not going to give you specifics. I'm not going to tell you if it's exactly back up to two years, but let's just say it's up significantly. OK. We can't -- we couldn't be delivering the kind of performance we're delivering if it wasn't.

It's significantly higher than the overall growth of the business in terms of new product subs, and it's continued to robustly grow moving forward, and we expect it to continue. So you can imagine that our volumes are getting back up to the places we would have expected them to be before COVID ever hit, which is a good sign and a good outcome. And more and more, as you can see in this quarter, we generated a lot of that new volume through digital direct channels and channels that were direct to us, which is another interesting factor here. You are absolutely right.

It used to be that LT, because of the price point and because of its exposure to small businesses, it was a barometer of the health of our business. But the move to the subscription model has kind of scrambled that a little bit because people that may have been buying LT exclusively for something or buying different products and other things like that. So that's why we began tracking in a deep way the monthly active, daily active usage of our products in various countries, which has become, frankly, our core barometer. And I think you can agree that that is a much more robust indicator of the health of our business than, for instance, looking at LT sales and LT transactions.

And it's also interesting to note, as commercial usage surges forward so as non-compliant usage, almost faster sometimes.

Jay Vleeschhouwer -- Griffin Securities -- Analyst

Right. So as not to disappoint you, let me just ask you this. You made a very interesting reference --

Andrew Anagnost -- Chief Executive Officer

Here comes part three. Here we go.

Jay Vleeschhouwer -- Griffin Securities -- Analyst

Exactly. You made a very interesting reference to a semiconductor facility in Asia that has become an AEC customer. And so the question there looking ahead is when you think about what Intel is going to be doing with fab construction and others in the semi industry, when you look at data center build-out and electric vehicle build-out, those are all mega commercial facilities. So what's your pipeline looking like for any or all of those?

Andrew Anagnost -- Chief Executive Officer

Yeah. That's a very excellent point, Jay, right? So we're already big in the data center pipeline, all right? BIM is supercritical to some of these workflows. I have personally engaged with customers that I will not name, and see some amazing things they're doing with our tools on the data center front and on the factory front. So we are actively engaged with deepening the penetration of BIM in all of those areas where people are standing up new factories.

And people are building new capacity. And you're right to talk about fab capacity for Intel and other places like that. BIM has matured to a point where when you combine it, especially not only with the capabilities of design and build, but ultimately, you'll see Tandem play a role in that space as well because Tandem as a digital twin, allows us to do a handover long term, not yet. Tandem is relatively new to market, but a digital handover to the owner for doing the lifetime management of the asset as well.

So look, that pipeline is robust and strong. We're already a big player in data center and new style factory standups in several sectors.

Jay Vleeschhouwer -- Griffin Securities -- Analyst

Great. Thank you very much.


Thank you. Our next question comes from Gal Munda of Berenberg. Your line is open.

Gal Munda -- Berenberg Capital Markets -- Analyst

Thank you for taking my question. The first one is just around kind of the way you're thinking of multiyear offerings going forward. We're hearing that toward the end of the year, you're kind of -- even on the product side, you're thinking about kind of decreasing the discounts potentially. Is that something that could have an implication beyond the EBA also going into product subscriptions to have a lower multiyear going forward? Or is it just something that, you know, you kind of managing cash flow as we head into FY '23, which is a big cohort of renewals, like you said?

Debbie Clifford -- Chief Financial Officer

Yes. Thanks, Gal. So I'll say again, our goal is to do what's best for our customers and what's best for us. You're right that we recently announced that we're reducing the discount on product subscription, multiyear contracts from 10% down to 5%.

And we're doing it because we don't feel that the higher discount is necessary. The value proposition of a multiyear contract to our customers is the price certainty, not the discount. Of course, we benefit from the lower discount because we get higher price realization. But at the end of the day, the multiyear contracts reflect strategic longer-term partnerships with our customers.

Now we make small price changes like that all the time in order to optimize our business and to maximize the value for both our customers and for us, and this is just one example of that.

Gal Munda -- Berenberg Capital Markets -- Analyst

Got you. That's really helpful. And then just the second question, we haven't heard much about the network licenses and how the -- kind of the transition is going. What you -- what we said in the past over the last year that obviously, the first ones to hand them over were the ones that had entitlement that basically gives them maybe more under the two for one or one for two effectively.

They give them more licenses that they needed, and the others will kind of come later. Are you starting to see that tip of the iceberg effectively when it kind of goes to the other way where people that are handing in their network licenses now are -- that's two for one exactly or even they need to take extra entitlement in order to be in compliance?

Andrew Anagnost -- Chief Executive Officer

So, Gal, we are absolutely starting to see the tip of the iceberg on that part of the transition. And also Flex, which is something that a lot of those customers were waiting for, because those customers were heavy users of our network license model, Flex. Flex in one of its forms replaces that old model. So with it -- as Flex starts to reach the channel and reach the customers more directly, you're absolutely going to see a greater acceleration of that because they do have to ultimately transfer and name every user to use Flex.

But we're seeing the tip of the iceberg on that right now. Flex's availability, broader availability as we move to the end of this year and into early next year will also accelerate that trend as well, which will help us retire that old business model and get our customers on the more advanced management systems that underpin Flex.

Gal Munda -- Berenberg Capital Markets -- Analyst

Got you. That's really helpful. Thank you so much, I appreciate it.


Thank you. Our next question comes from Matt Hedberg of RBC Capital Markets. Your question, please.

Matt Hedberg -- RBC Capital Markets -- Analyst

Great. Thanks, guys. Andrew, I want to start with you. Given the U.S.

federal infrastructure spending bill, one of the most often asked questions I get is really your exposure to infrastructure spending. I'm wondering if there's any way that you can help, just roughly frame up the magnitude of that business or even perhaps how fast is it growing relative to your overall sort of portfolio of businesses.

Andrew Anagnost -- Chief Executive Officer

Yeah. So we don't break out infrastructure as a business. So I can't give you specifics, but here's one of the things -- here's what I can tell you, and here's the philosophical statement I can make on this. One, we do not have any impact from a federal infrastructure bill built into our financial models, OK? So the numbers we've given you, they're all business as usual based on our normal course and speed, right? So I want to be super clear about that, so we're all on the same page.

However, we are big proponents of infrastructure spending and the need for infrastructure spending. And I think you're getting a sense -- just over the last few weeks and the last month, some of the critical drivers around what -- how serious it is when you have decaying infrastructure. I mean look at California, right? California built water infrastructure for slow snowmelts to catch water and have it dribble down from the melting snow and run off to the coast, and everybody was happy. That world is likely gone.

And what people need to focus on is more reservoirs, different types of infrastructure to capture rainwater rather than rely on snowmelt. These are things that, in some cases, were predictable 10 years ago, but we haven't made progress on. Also, look what's happening in Tennessee just last week. These horrible tragedies with these flash floods in the middle of Tennessee, unprecedented levels of speed and severity of floods, all related to water infrastructure.

All of these things are related to climate changes. Some of them were predictable. Some of them not. All of them are a 10-year backlog now in many places.

We have to build better across the board. And we believe that our tools, our capabilities, the digital platforms we're deploying are going to help people build better. And when you look at how we're positioned to capitalize on this, which I can talk to you about, is, look, we have got the solution that goes from end to end with the owner -- with the capital planning engagement, all the way to the use engagement with the vertical and horizontal components of construction and BIM in between. And I want to point to you some of our recent partnerships and acquisitions.

On road and rail, we partner with Aurigo to go after departments of transportation to help with the capital planning. We bought Innovyze, which has a capital planning tool upfront in the water infrastructure process. And we also have Spacemaker, which we haven't talked a lot about, which helps in the real estate development side from the capital planning and allocation there. So we're actually building out capabilities in the upfront through partnership and through technology.

And then we have all this capability that we've integrated into the construction cloud as well to help with vertical and horizontal construction. So we're ready. We've invested in the places that we think are critical, and we think people need to invest in digital technology to not only build what needs to be built, but build it back better and build it back cheaper so that we can start closing out the backlog because there's a big backlog. So there will be opportunity here.

It will be long-term opportunity for the company. It won't be short term, but there will absolutely be opportunity as people start to spin up these infrastructure projects.

Matt Hedberg -- RBC Capital Markets -- Analyst

That is super comprehensive. And as a sidebar, yes, it does feel like your acquisition of Innovyze, given the wording of the bill on water, was certainly timely. I wanted to go back to manufacturing just with another question. You noted in prior calls that Fusion 360 is near a tipping point.

And there was another question on MCAD and ECAD. I'm just curious, though, from a philosophical perspective, what's left for you to do within your manufacturing portfolio? In other words, is there a much more white space left beyond what you've got? Just sort of kind of getting a sense for where we're at in that sort of platform maturation.

Andrew Anagnost -- Chief Executive Officer

Yes. So there's always a little white space, OK? I think one of the things that's really important in terms of things we have to do, we have to finish integrating all the end-to-end capabilities, all right? So we have to make sure that we've gotten all the capabilities completely integrated in a way that makes sense. We have to continue to dial down on things like generative design and cloud-based and machine learning-based automation that automate workflows between some of these things. So even less sophisticated companies can take full advantage of highly sophisticated capabilities, which is a goal for us.

Now there's going to be other white space as we move down with regards to connecting to production planning on the shop floor, not just moving geometry directly to the machine through generative design, but actually managing production flow and some of the things associated with that in highly automated facilities. So we'll probably explore some of those areas as we start building out the platform. But really, in terms of what things have to happen to continue to accelerate Fusion's growth, it's all about building out the core design capabilities because we've got a lot of touchpoints in there. We've got ECAD.

We've got some really great partnerships around simulation, which will deepen over time. And we've also got excellent manufacturing capabilities. As we deepen and professionalize the design capabilities, you'll start to see more and more purchasing of sophisticated extensions on top of Fusion. So look for Fusion to become a more significant revenue driver as we move beyond FY '23.

Right now, we're focused on making sure the platform is best-in-class, that its cloud underpinnings are strong, that we build off the strong foundation we have right now, and that we build out some of these core design capabilities. But there are little bits of white space in there around production management, around some of the integrations with other types of capabilities, around costing and estimating that are going to be interesting as well in the future.

Matt Hedberg -- RBC Capital Markets -- Analyst

Super helpful. Thanks, guys.


Thank you. Our next question comes from Joe Vruwink of Baird. Your line is open.

Joe Vruwink -- Baird -- Analyst

Great. Hi, everyone. I wanted to start with the performance and the direct channel efforts. Obviously, you've had a goal to achieve 50% revenue share.

But it seems like in the last several quarters, just the movement to that level has accelerated a bit. Are there specific things you would maybe point to recently that help explain some of the acceleration? You brought up enterprise, and the eStore is maybe one responsible more than the other. And how much is this factoring into kind of the confidence you speak to entering the second half of this year?

Andrew Anagnost -- Chief Executive Officer

Yeah. So I think Debbie and I will both tag-team this a little bit. OK. So let me just talk about this at a high level.

Some of these things are cyclical by the way, OK? So there'll be quarter-to-quarter variations here. The fastest-growing channel we have in our business is the digital channel, all right? And more and more of our products, especially new products, especially through small businesses, are being bumped off to that channel. It's a big driver, and we've seen some acceleration there, and we continue to see acceleration there. It's a very healthy challenge.

That's what we've expected. We're certainly also being successful in our EBA business, which is driving up the percentage in certain quarters, all right? But don't look for that to be a linear transition, OK? We're going to get to the 50%. It's going to take time, but there'll be some quarters where we're trending up, and then quarters where we're trending a little bit down. But overall, as you fit the line through over multiple years, it's going to be heading up into the right direction.

There are some countries where we're getting very close to 50-50 and other places where we're very far away from it. So you have to look at the business a little bit more discretely as we get there, but don't look for this to be a straight line. Debbie, did you want to add anything?

Debbie Clifford -- Chief Financial Officer

Yes. I mean I think you captured it well, Andrew. As you said, there's two main parts. There's the enterprise or EBA business, and there is our e-commerce channel.

Now the enterprise business is a seasonal low in Q2, but we do have a strong pipeline. Andrew mentioned that it was the first quarter that we saw Upchain included in an EBA. So we're building momentum, and we anticipate that the bulk of our EBA selling will be in the back half of this year, like previous years. So things are looking good there.

On the e-commerce side, lots of growth there. We've been investing heavily. Last quarter, we talked about different things that we added like more out-of-seat capabilities, more calls-to-action across the site. We continued to invest this quarter.

Some examples of the changes that we made were one-step resubscribe capabilities so that expired customers can easily resubscribe. We have even more places for out-of-seat capabilities throughout the site. We launched a new Middle East site in June. So a bunch of things.

And you'll just see us incrementally add more functionality, more ways to engage with Autodesk so that it's easier to do business with us, and that's going to be part of our success to drive growth through that channel.

Joe Vruwink -- Baird -- Analyst

OK. That's helpful. And then I wanted to maybe reconcile what sounds like a lot of strong trends and higher confidence in the second half and still having the same high end of the revenue guidance, 16% growth intact for fiscal '22. Are there certain areas of the business where you look and it's still a bit held back, so it could be an opportunity for improvement over coming quarters, but maybe still not the full contributor that it could be?

Debbie Clifford -- Chief Financial Officer

I'll start, Andrew, and then you can chime in. I would say that overall, we had a strong Q2, and we exited the quarter with strong momentum. And we raised our revenue guidance on the year to reflect that ongoing strength and what we've seen in the business for the year to date. Andrew mentioned all the leading indicators were strong.

Usage returned to pre-COVID levels. The construction backlog is back online. So all we're seeing at this point is accelerating momentum. The only kind of nit piece that I would highlight in the back half of this year is that, typically, in our Q4, we do see a bit more upfront revenue recognition for some of the products that we typically sell cyclically in that period.

And that's a little bit of what you see in both Q3 and Q4 as we get to the back half of the year. But overall, just broad strength that we're seeing in the business, and that led to the increase in the revenue guidance on the year.

Joe Vruwink -- Baird -- Analyst

OK. Great. Thank you.

Andrew Anagnost -- Chief Executive Officer

Yeah. I think Debbie said it all.


Thank you. Our next question comes from Keith Weiss of Morgan Stanley. Your line is open.

Elizabeth Elliott -- Morgan Stanley -- Analyst

Hi, this is Elizabeth Elliott, on for Keith Weiss. Thank you so much. I just had a quick question on the current RPO-based bookings growth. It looked like year-over-year growth slowed a bit from last quarter.

So wondering if you could just highlight some of what could be driving that and some of the trends that you're just seeing in new business demand versus what you saw maybe in the prior quarter. Thank you.

Debbie Clifford -- Chief Financial Officer

So, thanks, Elizabeth. Our RPO growth was strong at 24% year over year, and we really do see that as the leading indicator of what's happening in our overall business. Now typically, we see RPO -- or what we see right now is that RPO growth shot up in Q4 because we had a very strong enterprise business agreement quarter. And so gradually, we're seeing that taper down over time.

But overall, 24% growth is really solid performance in RPO, and you'll start to see that bleed into revenue on the back half of the year.

Elizabeth Elliott -- Morgan Stanley -- Analyst

Got it. And then just one more. The ABI data for June noted some firms just weren't able to find enough workers, and that is a challenge. I think they talked about 60% of firms not being able to fill openings in the architectural staff.

So I was wondering if any issues in employment, is that a headwind for Autodesk seats? Or is that a tailwind for you guys as firms just need to digitalize faster and improve productivity?

Andrew Anagnost -- Chief Executive Officer

Sorry. Can you repeat that question?

Elizabeth Elliott -- Morgan Stanley -- Analyst

Yes. So, the Architectural Billings Index data for June highlighted that some of the architectural staff, which is having problems kind of filling seats, and that being a headwind -- just employment being a headwind to fill some of the demand capacity that they were seeing. So I was just wondering if employment headwinds in the overall kind of macro market is driving -- is that a headwind for Autodesk at all? Or is that actually a tailwind as firms need to digitalize faster, improve productivity by adopting Autodesk software tools?

Andrew Anagnost -- Chief Executive Officer

Yeah. OK. Thank you. It's actually more of a tailwind because what our customers are struggling with is they're trying to do more with smaller staff.

And the more digital firms are able to do that, the less digital firms are struggling. The scarcity of labor is pervasive across multiple industries and multiple sectors, but we believe this is just another driver with regards to people adopting deeper digitization and digital technologies. And as you can see from the fact that some of our results in some of our new seat volume, while you're hearing some of that in the ABI pressure with regards to their book of business, you're not seeing any kind of depressive impact in our new seat volume. So we expect long term, this is going to be a tailwind around digitalization and not any kind of headwind for us.

Elizabeth Elliott -- Morgan Stanley -- Analyst

OK. Thank you.


Thank you. Our next question comes from Jason Celino of KeyBanc. Your line is open.

Jason Celino -- KeyBanc Capital Markets -- Analyst

Hey, guys. Thanks for taking my questions. Nice acceleration on the make segment this quarter. And you mentioned that it was an all-time high for bid activity with BuildingConnected.

Since BuildingConnected is kind of at the tip of the spear in terms of where they see visibility into the construction cycle, how should investors think about this engagement activity flowing through the revenues?

Andrew Anagnost -- Chief Executive Officer

Yes. I think you should think about it exactly the way you said it. It is a leading indicator of future on-site construction activity, all right? So not all of that activity will convert to people buying our construction tools because not all of the activity is a good fit, but it is absolutely a leading indicator to shovels hitting the ground, all right? And I think that -- that's the way you should be interpreting it, and that's the way you should look at it, and that's the way we use it. And as we get deeper and deeper into BuildingConnected and deeper and deeper into how bid board works, we'll be creating more internal indices to track and watch some of these things, but that -- what you said is how you should view this.

It is a leading indicator of shovels in the dirt and future activities, which some of that will translate into future purchases of on-site construction software tools.

Jason Celino -- KeyBanc Capital Markets -- Analyst

OK. Well, maybe to double-click on that a little bit. When we think about it from like a timing perspective or it's most of the -- any help you can share on the types and timing of projects?

Andrew Anagnost -- Chief Executive Officer

No. I can't. I can't give you a lag indicator between increased bid activity on bid board and the start of new projects and what that impact is on our business.

Jason Celino -- KeyBanc Capital Markets -- Analyst

No, but thank you.


Thank you. And that is all the time we have for Q&A. I'd now like to hand the call back to Simon Mays-Smith for closing remarks.

Simon Mays-Smith -- Vice President, Investor Relations

Thank you, Latif, and thank you, everyone, for joining our Q2 fiscal '23 conference call. If you have any follow-up questions, please do contact the Investor Relations team, and we look forward to seeing you all at our investor day on Wednesday next week. Thanks very much. Goodbye.


[Operator signoff]

Duration: 61 minutes

Call participants:

Simon Mays-Smith -- Vice President, Investor Relations

Andrew Anagnost -- Chief Executive Officer

Debbie Clifford -- Chief Financial Officer

Saket Kalia -- Barclays -- Analyst

Adam Borg -- Stifel Financial Corp. -- Analyst

Jay Vleeschhouwer -- Griffin Securities -- Analyst

Gal Munda -- Berenberg Capital Markets -- Analyst

Matt Hedberg -- RBC Capital Markets -- Analyst

Joe Vruwink -- Baird -- Analyst

Elizabeth Elliott -- Morgan Stanley -- Analyst

Jason Celino -- KeyBanc Capital Markets -- Analyst

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